Libya's crude oil production could accelerate beyond 700,000 b/d by the end of the year after the United Nations confirmed that the country's two rivals groups signed a permanent truce, industry sources and analysts said Oct. 23. The UN said i...
Libya's crude oil production could accelerate beyond 700,000 b/d by the end of the year after the United Nations confirmed that the country's two rivals groups signed a permanent truce, industry sources and analysts said Oct. 23.
The UN said in a statement on Oct. 23 that the country's two warring factions -- the UN-backed Government of National Accord and the self-styled Libyan National Army -- signed "a permanent ceasefire in all areas of Libya." The deal was signed in Geneva, Switzerland with representatives of the GNA and LNA present.
The North African oil producer has been wracked by conflict between the GNA and LNA for almost two years. The impact of this has severely felt in the oil sector, especially in 2020. Libya's oil production had fallen to as low as 70,000 b/d this summer from around 1.10 million b/d before the blockade.
On Jan. 18, eastern tribes, supported by the LNA, halted exports from five key oil terminals, which dramatically reduced the country's crude production, pushing it to the lowest since the 2011 civil war.
"I would like to commend your commitment to meeting to reach an agreement that can help secure a better, safer and more peaceful future for all the Libyan people," said Stephanie Williams, Acting Special Representative of the Secretary-General of the United Nations in Libya.
Libyan crude production has been on a steep upswing since Sept. 18 when the GNA and LNA agreed a tentative peace deal that lifted the eight-month-long oil blockade.
The signing of the deal on Oct. 23 will help solidify some of the agreements regarding the resumption of Libya's crude exports.
Abu Attifel was the latest oil field in Libya to restart this week as the recovery in the OPEC member's production starts to pick up speed, taking the country's output above 500,000 b/d.
The signing of the ceasefire is likely to result in the opening of two key oil terminals - Ras Lanuf and Es Sider.
At the UN press conference Williams also admitted "there were good indications that the oil installations of Ras Lanuf and Es Sider will be ready to resume production in a very short period of time."
These two ports have remained closed as state-owned National Oil Corporation had still not lifted force majeure from these ports due to the presence of armed groups there.
"It seems force majeure [at these ports] will be lifted anytime soon and the country will start producing an additional 400,000 b/d [of both Amna and Es Sider crudes]. This will further weigh on demand for Mediterranean sweet crudes," said a crude oil trader.
Most analysts were expecting Libyan crude output to reach 650,000-700,000 b/d by year-end but after the latest ceasefire production is likely to increase further.
The prospect of Libya's full 1.2 million b/d capacity hitting the market in the coming months also coincides with a brittle demand outlook amid a second-wave of coronavirus infections.
It poses a big concern for OPEC+ as the coalition was looking to trim its output cuts in 2021. But fading demand growth and the resurgence of Libyan supplies have muddled the path to stable, higher oil prices.
"While OPEC delegates have acknowledged the improving situation in Libya and the untimely increase in production, there seems to be an agreement that the December OPEC+ meeting comes too soon for the group to discuss imposing a quota on Libya, given the fragile state of the North African producer's production recovery," director of geopolitics and energy at Medley Global Advisors, Mohammad Darwazah, said.
Libya holds Africa's largest proven reserves of oil, and its main light sweet Es Sider and Sharara export crudes are sought after for their gasoline and middle distillate yields by refineries in the Mediterranean and Northwest Europe.